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Title: Futures Magazine - The Art Of Day-Trading, Author: admin, Length: 35 pages This special issue is now available as an electronic, fully viewable *. pdf file. Futures & Options Trader - A FREE online magazine in PDF format bought to you by the publisher of Active Trader magazine. Each issue. futures lesforgesdessalles.info - Download as PDF File .pdf), Text File .txt) or read online. Futures magazine November


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For the past 43 years, Futures magazine has been the primary publication for retail and institution traders of commodity and financial futures, options, stocks and. Subscribe to MODERN TRADER magazine -- the essential journal for professional traders & active investors. Free Newsletter Modern Trader Follow. Currently, there is an extremely speculative short position as a percentage of open interest in coffee as measured by the Commodity Futures Trading.

In many respects, day-trading is not much different than war -- if you are not totally prepared to react to something you ve been waiting for, you should not be trading. Options and futures involve substantial risk and are not suitable for all investors. Of course, the variations shift contin- uously and any trade based on specific dollar amounts should be based on a lon- ger-term comparison. These systems were released to the public in July Are only a limited number of rules or conditions used?

Chicago Tribune. Strauss's Handbook of Business Information: Santa Barbara, California: Crain's Chicago Business. The New York Times]. Retrieved from " https: American business magazines American monthly magazines Magazines established in Magazines published in Chicago mergers and acquisitions.

Hidden categories: Pages using infobox newspaper with unknown parameters. Namespaces Article Talk. Views Read Edit View history. Languages Add links. This page was last edited on 24 February , at What are three biggest changes in clearing and broker- age over the last 30 years?

Obviously the notable fall of one FCM. So that gets people worried: Is their money really safe, is it really segregated? The lower interest rate environment the last several years; we have to diversify because in the old days we could break even but make money on interest income. Back when Enron was the soup du jour, and when they went under, we had a small trade we had done with them, nothing major, but guess what?

We had insured [ourselves] against Enron. Seems like you guys took a different path to growth than the MF Global mad dash. Pete Nessler continued on page 52 Pricing Transparency. With no commissions on your trades, no minimum deposits and no account maintenance fees, you get a transparent pricing model and highly competitive spreads. Market Transparency. See what others have traded and get a better view of market sentiment. Execution Quality. See for yourself why our clients recommend our award-winning platform.

Visit oandafxtrade. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Knowledge is power. Simply put, the more transparent your FX trading partner, the more you know and the more power you have. T he transition from fall into win- ter trading is an important turn- ing point for grain markets. Actual harvest results came in better than expected. The build- up in soil moisture, because of heavy spring and early summer rains, was a key factor in alleviating late summer dryness. The question now is how well demand will be able to accept this supply.

Grain supply fluctuations from plant- ing through harvest determine almost all of grain pricing from spring through fall. During the winter, though, these markets typically settle down. It is at this time that outside market issues exert a little more influence. Changes in the U. Abundant stocks While the trade has been dialing up its expectation of yields in recent weeks this also has been balanced by revisions in acreage.

On top of a record production, the U. But world feed buyers finally are getting adequate corn exports: That is an impressive total for this time of year. Livestock numbers will be slightly higher than last year. Still, ethanol needs are up only slightly, meaning corn heads lower. Allendale With a few more head, and more corn per head feeding, we have no qualms about saying a 5. Although producers are mak- ing strong profits of 50 cents per gallon, they are limited by the blend wall.

The EPA adjusted the ethanol blending man- date down from An ending stock of just over 2. Tight ending stocks Unlike corn, soybeans are still just getting by. Much of the U. We currently forecast U. That is a little higher than the old crop stocks that recently were revised from a tight million bushels to now million bushels. While these stock changes sound trivial, the new crop forecast is based on a usage of 3.

A minor change in that U. China had flocked to the U. While the United States is the only shop in town right now, the trade expects a new record to be posted for Brazil and a near record for Argentina. Farmers in South America generally plant from mid-September through early November. With the corn planting delayed in the first four weeks of that window, the trade expects a good increase into soybeans. Without any production problems, the U.

However this is not a done deal yet. The South American crop is not even fully planted. And even if big supplies are harvested, the trade has not forgotten the port mess in Brazil from this past spring and summer. If grain companies try to cram an even larger crop through those ports, which have not seen an increase in capacity, it certainly is possible a few extra orders for U.

Futures Magazine - The Art Of Day-Trading

It does not take much to turn a million bushel ending stock and a slightly bearish forecast into a million bushel estimate and a sharply bullish forecast.

Supply issues? While corn and soybean markets have spent recent weeks revising yield estimates higher, the wheat market has had to revise its expectations of adequate supplies.

In recent weeks there has been discussion sug- gesting supplies during this winter and beyond may not be as good as expected. Many question whether China, the second largest wheat producer, will see further revisions lower in the coming months. The newest area of concern is now Russia and Ukraine.

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While they have just wrapped up a bountiful harvest, recent heavy rains have delayed their normal September through early November winter wheat planting. Those fields may be left unplanted over the win- ter and perhaps planted with a spring crop such as corn. The result is that the world may lean on U. Instead of a sharp resurgence in wheat stocks back to burdensome, they will simply be left as a little less than average.

Lean hogs: Lower prices? There has not been any agricultural market more affected by the govern- ment shutdown than lean hogs. Over the past 15 years, cash markets have been automating pricing decisions based on the various USDA summary reports on pricing. Allendale 90 80 70 60 50 40 30 20 10 0 Soybean production That report implied that the recent run of low slaughter levels would be fixed soon. This also is import- ant as October and November are the seasonal heavy supply period.

That report also suggested there would be minimal impact from the hog virus PED. Much of the industry had previ- ously been dialing in net year-over- year decreases from December through March because of this problem. Most of the industry is taking a wait-and-see attitude on that potentially bearish idea. On a seasonal basis, hog futures typically decline until mid-November. By then the trade has dialed in where the correct cash hog low will be. Live cattle: Shutdown hurt demand? Placements of new calves and feeders into feedlots have been lower than last year since May.

The surprising mois- ture pattern in the Plains this summer recharged pasture ground. This led to many producers going for cheap weight gains while they wait for cash grain pric- es to fall. Some producers even have sug- gested that expansion is underway. Nine of the top 12 beef cow states have seen resurgence in pasture conditions. This means females that would normally be going to the feedlot will be held back to increase the beef cow herd.

This actual- ly helps lower beef production levels in years one and two of this cycle. While expansion is not completely agreed on in the industry, no one can argue that Q1 and part of Q2 cattle slaughter will be down sharply. Government workers and many companies that rely on government business are affected.

The last extended shutdown, starting in December , saw a 3. The other extended shutdown began in Alhough there was only a minor change in the December cattle price from the start to the end of the shutdown, we were interested to see that the price high down to the price low within the shut- down period was a huge 7.

Just like this year, the first few days of a shutdown actually saw a rally that peak- ed on Oct. We would prefer a bear spread in this example rather than out- right shorts in futures. For the long-term picture we still feel the deficit in supply for Q1 is too juicy to ignore. The U. Allendale Source: Allendale 2, 2, 2, 2, 2, 2, 1, 1, 1, 50 40 30 20 10 0 Hog slaughter The sharp decline on some weeks represents holiday shutdowns.

Reduced wheat harvest 22 50 15 Every time Bernanke blinks, the stock market jolts one way or the other. The basic agricul- tural markets offer these qualities.

And none is more basic or more inter- esting right now than corn. For traders looking to harvest some bounty of their own this fall, they can consider a simple strategy that can profit without taking wild risks, having perfect timing or even picking outright price direction. These fundamentals are paramount in establishing the long- term price direction of any commodity.

The season has been a banner year for corn production in the United States. By late July, the U. Department of Agriculture was projecting the United States would produce It is true that corn farmers have increased corn acreage in response to record demand.

However, available supplies are likely to outpace demand by a wide margin in the crop year. Ending stocks for next year are pegged at a whopping 1. Ending stocks represent the amount of the commodity left over in a given crop year usually September after all demand has been met.

This number can cast a wide shadow over price direction throughout the year. The reasons for this increased corn production are many. As global demand gradually has pushed higher over the past several years, so have corn prices.

Farmers respond by growing more corn to take advantage of the higher price brought on by demand. The agricultural industry has more than held its own in meeting rising glob- al demand for grains, corn in particular. The genetically modified seed industry has produced higher-yielding, and pest- and drought-resistant crops. Along with better irrigation and farming skills, this has resulted in not only higher yields but a larger growing region for corn. This is why corn is now seen growing in the former wheat fields of the Midwest and former cotton and peanut fields of the South.

More impressive, however, is the growth in yield. In the early s, an acre of corn could be expected to yield about bushels per growing season. In , that figure is bushels. Options strategies can be used to take advantage of fundamentally and seasonally driven price changes in the agricultural markets.

Opportunity knocks Before you go running out to short corn, hold on. The analysis described here is provided to give perspective; it is no secret to the market. Prices held at elevated lev- els through much of the spring while the crop was planted. However, as it became apparent that weather was favor- able and the crop was developing nicely, prices fell. While there still may be opportunities for traders to short corn on rallies this fall, the greater opportunity may be to do the opposite of the crowd and position for a harvest low.

Here is why. Seasonal tendencies. In corn, the U. Prices tend to peak when supplies are lowest and bottom when supplies are highest. Thus, at harvest time, when supplies are higher than they will be at any time all year, economics dic- tates that prices should be at their lowest.

While this chart is only an average of the past 15 years, it does seem to reveal a tendency for corn prices to bottom in early October.

That this happens to be right in the heart of the corn harvest is no coincidence. Once a harvest low is achieved, prices often begin to increase gradually as demand begins to eat away at new supplies.

Encouraging for traders who follow sea- sonals, corn appears to be correlating well to seasonal averages in While there obviously is no guarantee that prices will follow the seasonal average, there may be an opportunity for investors to consider during corn harvest time Picking a low in any market can be quite profitable for a trader who times it right.

Unfortunately, it is also difficult. The road to riches from picking lows in bear markets is littered with the financial corpses of those who got their timing off by even a hair.

There is a better way to play this without assuming the risk of an outright futures position, however. In most cases, buying options is a sucker bet. Too many new traders get lured into it as a low-risk way to play the futures markets. The odds are high that long runs of small losing trades eventually will empty your trading account.

A better route is selling options. Yes, you take on more risk than buying, and the profit potential is limited. But by sell- ing an option, you put the odds of suc- cess in your favor. And the risk can be managed. You just have to do it yourself. Bull, bear or sideways. To the casual trader, these terms paint a rough picture of where the market is moving. But to a certain concept in mathemat- ics, these terms precisely describe where prices are heading.

This concept is hidden Markov mod- els HMM. It was developed by Harvard Ph. Baum and his co-workers. The premise of the model is that the market is in one of five states — super bear, bear, sideways, bull or super bull — at any given time and tran- sitions between states obey the Markov property.

How the market switches between the five states is indicated by transition probabilities that tell us the probabilities of one state transitioning to another. The assumption that the market obeyed the Markov property occasionally was thought of as a good one because it removes the problem of lag.

This occurs when a cur- rent calculation holds little value because it is based on price action much further in the past. The further back you go, the less of an effect price action should have on current trading decisions.

Hidden Markov models are making inroads into institutional trading. Their applications are broad. One, forecasting future indicator values, can give you an edge trading the currency and commodity markets. When the market is in a bull state wb , it has a 0. Observations are any form of physical quantity we can measure from the market, namely price and indicators.

Their uses are two-fold. Over the last decade, HMMs have been creeping into the arsenals of some hedge funds. Because of their logically sound modeling process and subtle applica- tion of the Markov property, quants have found good use of HMMs in generating profitable trading signals.

However, HMMs showed their limita- tions when the time came to incorporate the next wave of trading techniques. Hedge funds experienced a gradual realization that more than one dimension of data was need- ed to outwit the market. Multi-time frame trading techniques in which two time frames were studied together were explored. Pairs trading in which prices of two assets were analyzed at the same time was the emphasis.

Intermarket analysis in which the forecast- ing of an asset in one market considering the dynamics of another asset in another mar- ket was developed.

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While the CHMMs developed by researchers from different universities vary in their specifications, all of them share a common underlying theme: To take two HMMs and couple them by way of their transition probabilities. Both of them make up our CHMM. Just as before, as time pro- gresses, the state of each market will switch to another state with certain prob- abilities. With the two markets represented in our model, we also need two observations to track, namely the price or indicators of our currency and of our commodity.

We feed both observation sequences into our CHMM to have it reconfigure itself to best represent each market. The result is a model with the predic- tive power to forecast the next observa- tion for both the currency and the com- futuresmag. CHMMs are utilized best when working with pairs of assets with this kind of relationship.

GOLD Source: CQG Integrated Client 0. As seen here, the currency mar- ket has a 0. Seen differently, an r state in the commodity market gives a 0.

Throughout coupling the two HMMs, we have not removed the Markov property when switching between states. The positives of HMMs are retained, the problem of lag kept bur- ied and the possibility of incorporating another dimension of data made avail- able. Quants were quick to explore pairs of assets to couple for the CHMM.

For us to capitalize on the predictive powers of a CHMM, it is best to use it to model two either strongly correlated or strongly uncorrelated assets. The fundamental relationship between gold and the Swiss franc helps us choose these markets.

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One, it is believed that dur- ing times of economic unrest, investors tend to dump the dollar in favor of gold. Because gold maintains its intrinsic value, it implies a negative correlation between the dollar and itself. Therefore, the Swiss franc and gold should move in opposite directions.

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First, we define the observable quantity. This would be the physical mea- sure of the asset used in the rules when generating trading signals. If we are trad- ing the tails of a distribution, it would be the CCI indicator.

If we are riding a trend, it would be the ADX indicator. In line with our strategy, we define the observable quantity to be the RSI indicator. Second, we need to construct our strat- egy. The beauty of the CHMM is the theory behind state switching nurtures this relationship: Finally, we set a one-to-three risk-to- reward ratio using two-times and six- times the period average true range for the stop loss and profit target, respec- tively. CQG Integrated Client 80 70 60 50 40 30 20 10 80 60 40 20 0 4 3 2 1 2: Such a comparison will be made.

With the interest of investigating the robustness in the CHMM model accu- rately forecasting values, we will use the model to trade on another setup, one that uses the Commodity Channel Index CCI indicator. The goal then is for the CHMM model to register an improvement in profits when trading the same already profitable strat- egy, but using its forecasted CCI values.

We compare the performances of the standard RSI and CCI systems with those enhanced by the four variants of the CHMM—namely predictions made by a Viterbi algorithm and a non-Viterbi algorithm, each using fixed or dynamic sizing. The test period is minute price bars over the first four months of Viterbi and non-Viterbi algorithms are basically two different ways to get the next most probable state.

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The CCI stan- dard pulled in a return of 0. The returns for CHMMs are 0. If we stick to the general rule that the coupled assets either need to be strongly correlated or uncorrelated, the CHMM should preserve its profitability. The theory behind the CHMM and HMM is robust enough to decode the relation- ship between two assets and also deduce how the transition probabilities in either market affect the other.

Be it equities in the same sector, rates and indexes, cross yen currencies, currencies and commodi- ties, bonds and economic indexes, or even macro and micro price movements, there are a number of possibilities.

It boils down to choosing the assets and defin- ing the observations. Can the CHMM combine three assets together? Of course it can. But just as it takes two to tango but three is a tangle, combining three assets becomes a mess- ier mathematical sight.

Donny Lee is a quantitative developer at a hedge fund trading forex in Singapore. He currently is refining trading strategies largely centered on Markov models. You can download the technical and supplemen- tary code, as well as data sets, from www. Reach Donny at quantdonny yahoo. Gann was a par- ticularly religious person, and he based this belief on predictions attributed to the prophets Daniel and Ezekiel. Surprisingly, Gann makes no reference to the Square-of-9, geometric angles or charts, and even omits Dec.

It appears that a great deal of the material Gann said is in the book is missing. Gann is well-known among trading gurus. However, we know little about the thought process behind his approach. Unlocking W. If we divide degrees by nine, we get 40, which mea- sures 40 degrees, 40 days, 40 weeks and 40 months, and shows why bottoms often come out on angles measuring one- ninth of the circle.

In Chapters 5A and 5B of the course, Gann elaborates upon the strength of the and degree angles, saying: As summer becomes hot and winter reaches frigid temperature extremes, days later, so too does stock market action reach volatile extremes. He had most certainly extrapolated from stories in the Bible that the seven years of famine followed by another seven years of plenty, and the 40 nights and 40 days of the Great Flood, indicate a degree rev- olution of time.

Albert Einstein once said that had the laws of the universe been complex, he would have had no interest in them. However, from the amount of data Gann futuresmag. The sun at the center of the Milky Way is 1. Given that the Sept. These students, this author included, would be the first to grant Gann the credit he deserves for discovering the time fac- tor — the mechanism that governs the behavior of markets. This is the basis of trend trading. At any given time, some stock or market sector is appreciating or declining steadily in price.

These trends embody significant profit opportu- nity for traders, offering relatively large rewards with comparatively little risk with respect to other strategies. However, the task is not so simple. Traders must not only find the right stocks or market sector exchange-traded funds, but they must execute a disciplined approach to trading them. Many traders miss profit opportunities because of fear. In the mind of the trader, either the stock has risen or fallen too much.

It has left no more room for predictable price change. However, most of the time, the trend con- tinues and opportunity is missed. These missed trades usually are when a smaller trend of the larger move breaks. Trend trading does not have to be com- plicated.

There are a number of tools avail- able to identify when stocks are making an extended move. One such approach might include the following technical conditions to qualify an uptrend: At any given time, a sector or stock can experience a huge trend.

Successful traders must not only identify these moves early on but also have a disciplined approach to trading them. Rather than a consistent, steady climb, there are short bursts in the overall direction broken up by periods of sideways consolidations.

In August, however, the stock started moving upward. Clearly, the larger trend was bullish. As price fol- lowed this bias, we saw sharp rises fol- lowed by a small period of consolidation and then more moves higher. The blue lines are trendlines that were drawn from the high point of the candle- stick that formed as a result of a solid upmove. The trendlines have been connect- ed to the tops of a few more candlesticks that created resistance.

Once the resistance broke, there was a fresh rally higher. The stock broke out above its week high and the , and day moving average on the three-day chart in early The stock did break the and day moving average, but later rallied further.

The stock had consolidated within a rising channel for the latter half of In , it broke above the range and started a rally that had periods of short trends and consolidations. The consolidation would then go on for a month, after which the uptrend would resume. The stock was creating higher highs and a future support level. Thus, the uptrend continued.

In trend trading of this nature, the best opportunity for trades comes when there is a pop followed by a consolidation. The creation of this temporary resistance and then the breaking of it provides the short-term momentum that allows traders to make solid returns over short periods.

When the subsequent con- solidation occurs, fear sets in, however, and traders find it hard to believe that the mar- ket could have another surge higher or lower. The uptrend in the stocks exists as long as they are above the day and the day moving averages. A better and more accurate indicator is when the day actually cross- es below the day while price remains below the averages. This creates a good base for the stock that becomes strong sup- port for the future. Once the stock breaks out of this consolidation zone, with the day above the day, a new phase develops and opportunities arise.

In many cases, these moves are accompanied by what some consider a counter-trend indicator — an overbought reading in the relative strength index RSI. In cases of strong trend moves, the RSI might remain over- bought while the stock continues to create new highs. Traders should ask themselves why stocks tend to trend in this manner, making new highs repeatedly over time. Reasons might be: Fundamentally, the stocks are part of undervalued sectors The stocks have consolidated because of low volumes or little fund interest Once the relevant fundamentals change — or the government comes out with some favorable policies — these sec- tors attract money from institutional investors because of under-valuation and brighter future prospects.

With so much money flowing in and new buyers being attracted, the rally is here to stay. Risk control A trader who sells a falling stock or buys a rallying stock has invested in the like- futuresmag. This chart of Lumber Liquidators shows how hard it can be to capture individual bursts higher in an uptrending stock.

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Several of the moves were short, quick surges providing little warning. ChartNexus Source: ChartNexus While that claim is hardly unique, Leapmach, which Chuang founded in after working at Getco for seven years, does many things differently. First, it is diversi- fied, trading all the major sectors instead of concentrating on stock indexes. And Chuang approaches each sector differently, utilizing both fundamental and technical analysis in his mostly systematic approach.

For example, I would pay more attention to fundamentals in equi- ty indexes whereas in gold, technical anal- ysis may be more meaningful. My long- to-short position ratios vary from time-to- time and product-to-product depending on current and prospective market condi- tions.

Only at the times when the markets become extremely volatile and directional [do] long options generate profits. In our annual review of new talent, here are three managers who successfully have ridden out the post aftershocks still affecting the business and markets. Taking care of risk T his is the 24th year Futures has profiled emerging com- modity trading advisors CTAs , and while every year is unique, in agriculture-focused and niche manag- ers have done well.

It is no surprise because it has been another difficult year for long-term trend following. It also makes sense for emerging managers to try to dis- tinguish themselves because even in a good trending envi- ronment, it is difficult for emerging trend-followers to be recognized. It is always a tough road to launch a new trading business, and this year once again has been difficult because of the fallout of MF Global and Peregrine Financial Group and the resulting additional regulatory burdens.

This is not an endorsement, but a review of new talent. After graduating in , his roommate advised him to go into trading, so he turned down a more lucrative position and took a job with, at the time, a start-up proprietary trading firm.

Most positions are initiated with spreads based on where Chuang expects a market to move over a specific period of time. Chuang splits his time between Chicago and Asia where he has other business interests. He was raised in Taiwan before moving with his family to Canada and then to Chicago after college.

His strong emphasis on risk management has been tested through some volatile markets. Leapmach has produced a com- pound annual return of Hirshik traded for various large institutions for two decades before going out on his own. He developed his Breakout Point strategy, which trades year U. Treasury bonds, the euro currency, e-Mini Nasdaq and silver, in The Breakout Point strategy is short- to-medium-term and utilizes countertrend as well as trending elements as part of a technical approach.

Hirshik uses basic technical tools: But he does not apply them to the four markets he trades; instead, he applies them to two exchange-traded funds related to each of those mar- kets. The futures is what I take the positions in; the ETFs tell me whether to take the position. He would go on to trade for numerous bank desks managing bond portfolios.

Total money under management: Once he went out on his own, he developed a quantitative approach to trade credit default swaps. But as the mar- ket grew more difficult, he shut the fund down, luckily before the huge volatility spikes in CDS leading to the credit crisis.

We were fortunate because it would have been messy…spreads between corpo- rate bonds and CDS became huge. Working on order desks of large insti- tutions helped in developing his cur- rent strategy. It taught him the risk of overleveraging and gave him an appreciation of the safe- ty of listed regulated markets. Volume also plays a role in his signal. Rogers Varner Jr. My dad was a merchant, my grandfather grew it and my great grandfathers grew it and fought Yankees over it.

Our thing has always been cotton and I still gravitate toward it. Despite that background, today he focuses on the fundamentals. Basically he selects a direction based on the fundamentals and uses technical analysis for timing of entries and exits. Varner has spent his career working with small farmers, so when he launched his CTA he kept the minimum investment levels low so his hedging custom- ers could participate.

His Fallback fundamen- tal program, which launched January , is up Varner uses options in his strategy because of his long-term outlook. With options you do not have to be as precise on the timing of a move to profit from it. I am not a day trader — hopefully when I put a position on, it is good for a year to 18 months, and then I learn to protect and trade around it.

If trading a harvest low in corn, you would begin looking at put options in October for the corn mar- ket. How close or far away your strike is from the actual price of corn is dependent on your risk tolerance. The object is to pick a price level that corn will not reach and sell a put option at that strike price for a specified premium.

If the option expires with the value of corn anywhere above that strike price, your option expires worthless and you keep the premium as your profit. You might have to buy it back at a loss, depending on how much you are willing to lose. Decide how much you are willing to risk prior to entering the trade.

If the option increases to that value, buy it back. The upside is that you do not have to pick the low in corn to be profitable. You can be way off in your pricing or timing and still make money on your trade. If you sell a put option 50 cents below the market, corn can keep falling and you can still hold your option. All corn has to do is be anywhere above your strike at expiration and you win.

The high odds and forgiving nature of short options is what attracts many sophisticated investors to the strategy, as long as they are comfortable managing their own risk. As a trader, looking to sell puts on the March contract below that range seems to be a high-odds prop- osition. Sell further away if you seek less risk, closer if you seek higher premium.

You likely will have to go out to the March con- tract to get them. As an option seller, time is always on your side. The pattern indicates that prices tend to bottom in early October. Moore Research Center Inc. A trader who buys a falling stock or sells a rallying stock has bet on a reversal in the larger trend. Of course, reversals hap- pen, but over time the safer bet is to go with the trend rather than assume the moment you make your trade is one of those rare moments when price turns.

This stock has been in a bearish trend from the beginning of , with some pullbacks seen in between. Jindal saw a sharp sell off in June and then later consolidated for a greater part of July. Resistance formed and provided some trading opportunities. A trader going with the larger trend would have shorted it around and waited for the stock to fall, but a trader who bet on a trend reversal would have bought it and waited for to break. This is a key price, both in terms of resistance and moving average vicinity.

If the trend on a larger time frame is bearish, then trades should be taken with a bearish view around the resistance levels. If the trend is bullish, then the trades should be taken with a bullish view once the resis- tance on a smaller time frame breaks.

When a trade is taken on a breakout basis and the price is above the day moving average, positions should be held until the price breaks the average. In most cases, these positions are held for one to two months. Short-term traders can use a stop loss of a close below the candle that provides the breakout confirmation. Trend trading is an important tool for all stock traders to have in their arsenal. The benefits are that trending stocks move in one direction steadily; there is little confusion over the direction of price.

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When timed correctly, profits come quick- ly. Generally, trend moves are supported by strong fundamental underpinnnigs. As quickly as prof- its appear, they also can disappear. Plus, breakout trend moves can be missed easi- ly, particularly by traders paralyzed by fear. Once gone, it may be some time before a trend opportunity re-presents itself. Raghav Behani is a trader and investor in the Indian stock markets.

Reach him via his web- site www. This is a typical scenario during long trends. Recent consolidation around could be construed as bottoming behavior, but the safer trade might be to go with the larger trend. For Classified Information: Chris Casey Email ccasey futuresmag. COM futuresmag.